Form taskforce to monitor delivery of stimulus packages

A multi-stakeholder taskforce should be formed to monitor the delivery of the Tk 101,117 crore stimulus packages in order to avoid misuse and leakage, a think-tank and an expert said yesterday.

The taskforce should have representatives from the ministries, the central bank, commercial banks, trade bodies, civil society, non-government organisations and academia, the Centre for Policy Dialogue (CPD) said.

The idea of the think-tank was backed by Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh.

"A monitoring committee has to be set up to look at who is getting how much. It has to be ensured that excessive loans are not given to anybody or any group that will undermine the recovery effort," Mansur said.

Bangladesh Bank has separate teams to monitor the implementation of the stimulus packages, said Lila Rashid, a general manager of the central bank.

They spoke at a virtual dialogue on "Responding to COVID-19: A Rapid Assessment of Stimulus Packages and Relief Measures" organised by the CPD.

The CPD carried out a rapid assessment of various government initiatives that have been announced to stimulate the economic activities and provide relief for the marginalised sections of the society.

In a paper, it said lack of fiscal space has compelled the government to offer mostly liquidity support instead of fiscal stimulus to mitigate the adverse impacts of Covid-19.

In general, the nature and design of the liquidity support packages have three main characteristics.

Firstly the greatest amount of liquidity support is offered to the least vulnerable and secondly the most stringent requirements and regulations are applicable to the most vulnerable.

The third is that several loopholes have been left wide open to provide ample room for unscrupulous individuals and businesses to exploit humanitarian aid for private gain.

The banking sector has been tasked with the tremendous responsibility of supporting businesses and individuals during the pandemic as they would channel more than Tk 82,000 crore of the stimulus packages, said Fahmida Khatun, executive director of the CPD, during a presentation.

The reality is that the banking sector of Bangladesh is unprepared to deliver the Covid-19 related liquidity support packages. Most of the major problems in the banking sector continue to persist during the pandemic and are apprehended to get more acute, the CPD said.

"Urgent steps are needed to rescue the banking sector from the quicksand of poor governance, because if it sinks underground it will most likely take the entire economy along with it," the think-tank said.

The CPD said the core objectives of the stimulus packages would hardly be achieved through the Tk 5,000 crore emergency support for the export-oriented industries.

The impact in terms of stimulating economic revitalisation of the RMG sector is rather limited. Raising private consumption through workers' wages could not be ensured due to irregularities in wage payment while despite the credit support, workers' employment could not be ensured.

Rather, there are incidences of unemployment in the RMG sector, the think-tank said.

"In this backdrop, the government needs to rethink about the stimulus package in order to ensure its effectiveness."

The CPD said the stimulus package for SMEs is an important monetary policy instrument. However, the instruments in its current form will hardly achieve the objectives.

The government needs to think of additional measures to ensure that SMEs are actually able to draw benefits from the stimulus package, it said.

Given the current allocation, coordination, monitoring and infrastructural management of the existing social safety net programmes, this would be arduous to reach the maximum number of beneficiaries amid this crisis.

Besides, the social protection system of the country suffers from the problem of targeting, leakages and beneficiary selection which came at the fore at this critical moment.

Due to these ongoing flaws in the current system such as the distribution mechanisms and corruption in the listing process and its delivery system, more attention in the coming days will be required from the authorities and policymakers, the think-tank said.

In this context, attention will be required to focus on preparing a central database of the beneficiaries for all safety net programmes and enhancing and enforcing the coordination and collaboration both at the local and central level.

Huge demand for loans within a time could make it difficult to exercise due diligence and undertake the inspection of borrowers to examine repayment capacity.

This could end up with disbursement of a good amount of loans to possible future defaulters, said Khondaker Golam Moazzem, research director of the CPD, during a presentation.

About 3.3 per cent of the workers surveyed reported that they had been laid off from their factories, the CPD findings showed.

Unless the business situation improves, incidences of both laying off and retrenchment of workers will increase further in the coming months, the CPD said.

"In other words, fiscal stimulus did not help stop laying off of factory workers. Without any improvement in the business situation, workers would be retrenched in the coming months."

The government needs to rethink about the stimulus package in order to ensure its effectiveness in achieving the stated objectives, it said.

More than 80 per cent of the stimulus packages would be channeled through the banking system, said Syed Mahbubur Rahman, managing director of Mutual Trust Bank.

Banks have been in a vulnerable situation for the last few years and are lagging behind in terms of international standards. Except for a few banks, all lenders are in a difficult situation, he said. 

The implementation of the stimulus packages exposed the banking sector to vulnerability in a way, he said.

There are 14 to 15 per cent NPL in SMEs, so banks are apprehensive to some extent to lend to the entrepreneurs in the segment, Rahman said.

"The stimulus packages have helped the garment sector keep open the factories in the last two months," said Md Fazlul Hoque, managing director of Plummy Fashions.

He is hopeful that the sector would return to the pre-coronavirus level within the next five to six months. Even there is the possibility that Bangladesh's garment sector can do better than in the past as orders might be shifted away from China.

The major challenge facing the garment sector would be to survive in the next six months, said the entrepreneur. "If the factories are up and running, no shuttered factories would receive orders even if there is any opportunity. We are still getting 30 to 40 per cent of the orders because the factories are open."

BB's Lila Rashid said the industries ministry has a monitoring team comprising government and private representatives that has been working for the last two months on the stimulus packages earmarked for the SMEs.

A decision has been taken to set up district level committees under the national committee and the district-level committees would be linked with the central bank, she said.

"We have also started working to come up with a credit guarantee scheme. The process began last year and it was thought that it would run on a limited scale. We are considering to give full-fledged support to the SME sector."